PAYMENT SERVICE
Financial Supervision examines Wirecard's communication
The payment service provider has often been criticized in the past for alleged manipulations. Bloomberg
The Wirecard headquarters in Aschheim near Munich
The payment service provider has often been criticized in the past for alleged manipulations.
Frankfurt, Munich The payment processor Wirecard can not speak of a peaceful Advent season. According to information from the Handelsblatt, the German financial regulator Bafin examines the communication of the controversial Dax Group. The Bafin had banned in the spring so-called short sales , which were used by speculators for betting on falling Wirecard courses.
In addition, the Bafin had been suspected that journalists of the British newspaper "Financial Times" (FT) have worked inappropriately with speculators who had attacked Wirecard. In view of the escalating dispute over the corporation, the supervisors are now stressing that they are not only looking at the opponents of Wirecard, but also at the group itself.
On Monday, Bafin said on Handelsblatt's request, "The fact that our investigations are going in all directions - and therefore also affecting Wirecard - is not new." It is also stated: "About the facts of the case reported to the Munich District Attorney's Office in April In addition, we further investigate whether market manipulation may also have been caused by incorrect / misleading information or the retention of ad hoc communications by Wirecard. "Hedge fund Greenvale Capital had filed a complaint against Wirecard for misleading information, according to the news magazine" Spiegel ".
Only at the end of September, the Bafin had demanded a fine of 1.5 million euros from Wirecard because of formal errors. At that time it was about missing signatures and a late announcement about where to find the semi-annual report 2018 on the Internet.
SUBJECTS OF THE ARTICLE
Wirecard Fintech exchange BaFin MasterCard
The fear of the authority to be perceived in the market as a quasi-extended arm of the group, is not unfounded: For example, in November, the Prague investment house "Krupa Global Investments" had its five-million-euro entry with Wirecard with the following statement: "The German Regulatory Authority Bafin and the German Government fully support Wirecard's mission and expansion. "An impression that does not meet with the overseers' approval.
Cash flow in focus
The group from Aschheim near Munich is under a press-drum fire after critical reports in the "Süddeutsche Zeitung", the "mirror" and the "FT". After another article by the British business newspaper, the share price on Monday fell by up to five percent, but later recovered significantly.
Essentially, the criticism can be summed up in two main allegations: Wirecard has therefore insufficiently informed the capital market about problematic facts and applies irregular accounting approaches. In the room there is a bad suspicion: Does the corporation, which surpasses its own forecasts year by year, economise less solidly than expected - and stuffs balance sheets with fresh funds?
Food received the latter accusation by the most recent "FT" article from this Monday. This covered the cash flow of Wirecard and its composition. Cash flow is considered to be an important indicator of the liquidity of a company and, in a simplified way, it compares the income of a group to the expenses. If it is permanently negative, liquidity problems threaten.
At first glance, there are no indications at Wirecard, on the contrary: Numerous analysts base their buy recommendation on, among other things, the strong cash flow. In 2018, this ratio rose to 500 million euros, while in 2014 it was only about 144 million euros. In particular, the cash flow from operating activities grew significantly, which is considered to be fundamentally reliable value on the stock market, but the cash flow is usually difficult to influence.
Questionable fiduciary funds
The "FT" refers to figures from the end of March 2017. At that time, the Group had a cash position of 1.45 billion euros. According to "FT", 334 million euros of this could have come from the opaque third party partner Al Alam from Dubai, who had been critically discussed in the past, and were located on so-called trust accounts.
The funds of other third party partners on trust accounts were added to the cash holdings. The FT quotes finance professor Collins Ntim of Southampton Business School, who calls this approach "aggressive accounting."
At Wirecard you can not understand the excitement. All cash positions have been correctly reported in accordance with the international accounting standard IFRS, according to Aschheim. The auditor EY have fully audited the correctness of the consolidated balance sheets of recent years.
The Wirecard Annual Report explicitly refers to its own interpretation of fiduciary accounts: "Acquiring accounts, some of which are not held directly but on behalf of Wirecard, are also reported under cash provided that Wirecard uses this money at short notice can dispose of. "
Criticism of communication
According to Wirecard, credit card networks such as Mastercard and Visa do not have direct relationships with local retailers, but via intermediate partners who settle the payments. These acquirers are basically interchangeable and connected to the Wirecard platform, the Group emphasizes.
A small percentage of the payments are withheld to be prepared for defaults and reversals. These funds are parked on fiduciary accounts. If there are no corresponding chargebacks, Wirecard can dispose of the funds within a short period of time. Since the Group bears the business risk, the allocation to the cash position according to this interpretation is correct in the balance sheet. An accountant who knows the payment industry well and was able to speak with the Handelsblatt, considers the approach to be fundamentally understandable. The problem is, however, the great importance of the partner Al Alam.
Wirecard has been suspected for some time that there may have been irregularities in the balance sheets in the past. The main reason for this is the complex business model. Most recently, the Handelsblatt had reported on the refused certification for the latest available balance sheet of the group's Singapore subsidiary. This had come under the headlines due to investigations by the local financial regulator.
In order to prevent such problems, the Group relies on a new internal reporting structure, which is intended to connect the local units more closely to the German headquarters with the help of regional "hubs". In addition, Wirecard commissioned a special audit of the balance sheet by KPMG. She started work with a 16-member team and summoned board members to the hearing within a short time. The investigation is conducted by three KPMG partners, including the German KPMG board member Sven-Olaf Leitz.
In addition, the Group wants to improve its capital market communication. "In our view, we are already the most transparent company in our sector. At the same time we are constantly looking for ways to optimize, "said a spokeswoman on Monday. According to insiders, Wirecard wants to explain the role of its third party partners even better in the coming days and is working on a corresponding presentation - the Group had already announced steps in the past.